Reader AI wondered what happened to the homes for the middle class. The Seaport is a good example. In 1977, these 1,512sf to 1,946sf homes across the street from the La Costa Resort were priced reasonably:
Today?
A remodeled house with an extra 500sf addition just sold for $1,035,000!
Here are photos of it:
Link to Photos
I had to run the inflation calculator… $69,900 in 1977 money was equivalent to $254,803 in today’s money. If they’re selling for a cool million that’s a 6.88% compounded return over 40 years.
69k invested in the DJI in 1977 with dividends reinvested would be around $4,000,000 today. 20% downpayment ($13,800) invested then in DJI would be worth $810,500 today.
Median household income in U.S. 1977 was ~13k, house price to income 4.3X
Median household income in Carlsbad in 2010 was $105,000, house price to income 10X
Hong Kong has the most unaffordable housing prices at 20x, but also the lowest tax rates in the world.
Will the price to income ratio can expand much more, considering taxes, pension deficits, and Gen y/x incomes and relative to debt? What about when rates hit 5% on the 30 year?
Mortgage rate in 1977 was around 8.5%
Interesting times indeed.
https://westegg.com/inflation/infl.cgi
https://www2.census.gov/prod2/popscan/p60-117.pdf
https://dqydj.com/sp-500-dividend-reinvestment-and-periodic-investment-calculator/
Good points Brian.
Back in the 80s to 90s I remember looking at a home that was $150,000 (not California). We just could not justify that amount of money. Our home at that time was worth $50,000.
Ten years later we ended up buying a similar home and it was then $275,000 and our home $100,000. I was upset with our “bad choice” until a friend showed us numbers like yours and that we had actually made more money in investments during that time. whew. (Still should have bought in Carlsbad then!!!)
Amazing how times have changed since 1977!
Checking an online inflation calculator, $56,990 for the Portsmouth plan in 1977 would be $241,398.67 in 2018 dollars (Annual inflation over this period was about 3.58%) and this is for a NEW house!
Where is that extra $700,000+ in value coming from for a 41 year old house!? Could this just be an anomaly caused by historically low interest rates?
30 year FRM in November 1977 was about 8.92%
Assuming 20% down, PITI would be about $421 a month on that house in 1977 dollars. And $421 per month in 1977 is worth $1,783.27 per month in 2018!
With the median income in San Diego county being just $63,996, I can’t see how million dollar houses are sustainable over the long term.
Sure, let’s assume that there’s no limit to the number of rich people available to purchase million dollar, 41 year old houses.
These rich people will still want services while living here. Things like trash pickup, good roads, baristas, hairstylists, dog groomers, manicurists, etc. These service people have to live somewhere too!
“These rich people will still want services while living here. Things like trash pickup, good roads, baristas, hairstylists, dog groomers, manicurists, etc. These service people have to live somewhere too!”
That’s where the trusty bullet train from Lancaster comes into play.
High speed hovercraft connecting the service people barges a mile off Mission Bay to the mainland will take up any slack.
Look at me I’m kidding, of course. Ha ha.
eddie89 we are on the same wave-length. I am looking at a playing card from a deck of 52.. What is it? If correct, we need to report to Pechanga immediately!
Brian – Yeah, I saw your post after I uploaded mine and had to do a double take! LOL!
What’s that saying? Great minds think alike!? 🙂
Now if only I could pick those “winning” Powerball numbers!